Drilling deep for capable shale rigs

As Australia seeks to develop its shale gas resources, one of the biggest obstacles the industry faces is sourcing equipment.

There are only two drill rigs in Western Australia capable of drilling wells to depths beyond 4,000 metres required for extracting shale gas.

Both rigs are owned by WA company Enerdrill and one has just been contracted to a customer in New South Wales. Advanced contract negotiations are continuing for the second rig.

A third drill rig owned by Oman-based MB Century is ‘stacked’, waiting to be sold most probably overseas, after New Standard Energy as the operator of the Goldwyer joint venture with ConocoPhillips terminated its contract with Century.

Citing “concerns relating to safety, competency and operational performance and reliability grounds”, New Standard Energy has delayed its drilling of Gibb Maitland-1 in the Canning Basin until it secures a new rig.

Nationwide it is believed there are less than 15 shale gas drill rigs operating, with most in the Cooper Basin in South Australia, one in Queensland, one in New South Wales and two in WA.

Enerdrill managing director John Wells said acquiring multi-million dollar rigs was held up by red tape.

“You can say, ‘no, there aren’t enough drills in Australia’ in one breath because if all the wells that are supposed to be drilled go ahead then there’s not enough rigs,” Mr Wells said.

“But with the difficulty in getting approvals and licences and agreements with traditional landowners and all the other red tape, in the other breath you could say there are probably enough drills because the whole exploration process is getting slowed down.”

Mr Wells said once rigs were sourced, even regulation differences between eastern states and WA meant time-consuming and complicated amendments had to be made, mainly around electrics, to bring rigs up to WA standards.

“It’s a very long and expensive and drawn out process, which has to be contemplated when bringing in a rig, especially when it’s for a contract with a known start date. It’s very difficult to plan,” he said.

Mr Wells said one of Enerdrill’s rigs that could drill to 4,000m was sourced from interstate.  The other rig that could reach depths of 5200m was brought in from Canada and took more than two months to clear Australian Quarantine and Inspection Service (AQIS).

Despite difficulties acquiring rigs, Mr Wells said the company had stuck by its original strategy since creating Enerdrill earlier this year.

This required a large capital investment and has several high-profile investors, including Rod Jones of Navitas, members of investment firm Argonaut, Jim Currie of Bonnie Rock Transport, mining corporate finance specialist Craig Burton, Mr Wells, Enerdrill’s Jon Biesse and some silent partners.

Enerdrill’s two rigs have a joint replacement value of $30 million to $35 million.

Mr Wells said the company was looking at bringing in more drills, some with capacities for shale gas development as well as smaller, highly mobile rigs from a few overseas locations, at a number to be “dictated by the market”.